AUD/USD climbs back inside range, after fall in US factory gate prices

• AUD/USD scales higher for the third straight day and touches over a one-week high.
• The upbeat Australian jobs data, along with the weaker USD, lend support to the pair.
• Expectations for an imminent Fed rate hike pause drag the USD to a two-month low.

The AUD/USD pair builds on this week's recovery from the 0.6620 area, or the monthly low, and gains positive traction for the third successive day on Thursday. The momentum lifts spot prices to over a one-week high, around the 0.6750 region during the first half of the US session and is sponsored by a combination of factors.

The Australian Dollar is drawing support from the upbeat domestic jobs data, which showed that the jobless rate stayed near a 50-year low level of 3.5% and the number of employed people rose by 53K in March, more than the 20K expected. The markets started pricing in the possibility of a 25 bps rate hike at the next Reserve Bank of Australia (RBA) meeting in May, which, along with the underlying bearish sentiment surrounding the US Dollar, provides a modest boost to the AUD/USD pair.

In fact, the USD Index, which tracks the Greenback against a basket of currencies, drops to its lowest level since early February amid growing acceptance that the Federal Reserve (Fed) is nearly done with its rate-hiking cycle. The bets were reaffirmed by the softer-than-expected US Producer Price Index (PPI) figures on Wednesday, which lifted hopes disinflation is progressing smoothly and may even accelerate, potentially opening the door for the Fed to cut rates during the second half of the year.

Adding to this, the March FOMC meeting minutes showed that several policymakers considered pausing interest rate increases after the failure of two regional banks. This, in turn, keeps the US Treasury bond yields depressed and continues to weigh on the Greenback. This, to a larger extent, overshadows looming recession risks and remains supportive of the bid tone surrounding the AUD/USD pair, though worries about a slowdown in the Chinese economy could cap the Aussie.

From a technical perspective, bullish traders are likely to wait for sustained strength beyond the 0.6745 confluence, comprising the 200-day Simple Moving Average (SMA) and the 50-day SMA. This is closely followed by the 100-day SMA, which if cleared will be seen as a fresh trigger for bullish traders and set the stage for additional gains. The pair has broken back inside its previous month long range after briefly flirting with a downside breakout on April 10. The top of the range would be expected to cap gains and lies at 0.6825, just above the 100 DMA. 

Technical levels to watch